Yeah, currently I'm wondering what LCD driver I have... Maybe I should open it up...

One at a time.
AFAIK, SirCmpwn never actually released it. What you're probably talking about is just a bit he wrote up so we could give feedback on formatting.
As for larger sprites, you have two options. The first one is to use the Bitmap( command, which is a bit slower (being an OS call) and somewhat inflexible. Your other option is two draw multiple sprites, though, for 32*32, that would be 16 8*8 sprites.
Now to your main question.
First of all, the subroutine DR you have should be at the end of your code, because otherwise your program will right after drawing the sprite once. Also, you need to erase the sprite at its original location when you move it because the edges get left behind. Depending on what else you're doing, you could erase the whole screen, backup the entire screen to the backbuffer, or you might have some other option that I can't think of right now.
Also, that said, are you sure it's exactly 8 pixels? That shouldn't happen. If you haven't realized yet, the direct key commands (of the form getkey(9)) are much faster than just using getkey, and it's probably just moving very quickly.
(Note that some of my criticisms of your code may not be valid, as I'm unsure if what you posted is just an example)
Good luck in Axe!

So I have a special driver... woohoo...
I'll get some pics so you can see it for yourselves.
Edit: got the pics, they're attached. They're named to correspond to the port output that produced them.

Yeah, have fun.
I'll be gone later this month (again), but I'll delay posting about it until it's about to happen.

Mine is a revision M from the P factory. I don't need ALCDFIX.

So, while messing around with communicating directly with the LCD in Axe, (I made a few Asm routines and put them under labels), I made a typo. Long story short, I found the use for the undocumented LCD commands ranging from $0C to $0F. Fitting with the LCD documentation, these commands are of the form %000011**
Setting bit 0 ($0D) flips the screen left/right, and setting bit 1 ($0E) flips it up/down, and setting both ($0F), well, does both, rotating it 180 degrees.
Now you know. If you have Calcsys, output these values to the LCD command port (port $10) and see it for yourself.
(Note that I only know it works with the type of LCD I have on my 84+SE, which is the kind not needing ALCDFIX)

sub( is in the catalog, and is best accessed by going up from 'T'
ref( and rref( are in the matrix menu under math.